VES-13-18-RR:IT:EC 114302 GOB
Port Director of Customs
Attn.: Vessel Repair Liquidation Unit, Room 107
P.O. Box 2450
San Francisco, CA 94126
RE: 19 U.S.C. 1466; MOKIHANA, V -006; Vessel Repair Entry No.
C27-0158612-8; Protest
Dear Madam:
This ruling is in response to your memorandum dated March
13, 1998, which forwarded the protest submitted by Matson
Navigation Company ("protestant" or "Matson") with respect to the
above-referenced vessel repair entry.
FACTS:
The MOKIHANA (the "vessel"), a U.S.-flag vessel, arrived at
the port of Los Angeles, California on October 28, 1996. The
subject vessel repair entry was filed on November 5, 1996.
In Ruling 113883 dated April 1, 1997, the application for
relief with respect to the subject entry was granted in part and
denied in part.
In Ruling 114010 dated October 3, 1997, the petition with
respect to the subject entry was granted in part and denied in
part.
ISSUE:
Whether the subject items are dutiable pursuant to 19 U.S.C.
1466(a).
LAW AND ANALYSIS:
19 U.S.C. 1466 provides for the payment of duty at a rate of
fifty percent ad valorem on the cost of foreign repairs to
vessels documented under the laws of the United States to engage
in foreign or coastwise trade, or vessels intended to be employed
in such trade.
General Services and Drydock Costs. Matson claims that
these costs are nondutiable. As we have stated and explained
many times previously, these items are to be prorated between
dutiable costs and nondutiable costs.
Matson has asked questions with respect to how the costs are
to be prorated.
In Ruling 226873 dated October 29, 1996, we stated:
In accordance with Ruling 113474 and Memorandum 113350,
and as your forwarding memorandum states, the
drydocking charges should be prorated between the
dutiable and nondutiable costs associated with the
drydocking. The method of prorating was described in
Ruling 113474, supra: the drydocking costs "should be
apportioned to reflect the dutiable and non-dutiable
foreign costs in this entry." For example, if, aside
from the subject "drydocking costs," as described
supra, fifty percent of the costs of that particular
drydocking were dutiable and fifty percent were
nondutiable, then fifty percent of the subject
"drydocking costs," as described supra, would be
dutiable and fifty percent would be nondutiable.
The costs of general services and/or drydock costs to be
prorated are not involved in the calculation of what portion of
the costs is dutiable and what portion is nondutiable.
With respect to the inclusion of 19 U.S.C. 1466(h)(3) duties
in the proration calculation, in Ruling 226873 we stated:
Duty assessed under 19 U.S.C. 1466(h)(3) is vessel
repair duty (i.e., 19 U.S.C. 1466 duty), albeit
assessed at a rate of duty different from the fifty
percent rate of 19 U.S.C. 1466(a). As such, the
dutiable amount with respect to duty assessed under 19
U.S.C. 1466(h)(3) is to be included in the dutiable
component for the purpose of the proration calculation
which is described supra on pages four through six of
this ruling.
Modifications to Upper Longitudinal Hatch Coaming (531).
Matson claims that this item is a nondutiable modification. It
states: "This work was not repairs, but was performed to correct
a design deficiency, which required structural enhancement, a
permanent modification, at many various locations of the upper
longitudinal coaming for added strength and durability."
[Emphasis in original.] In its application for relief with
respect to the subject entry, Matson stated that this item:
"...entails the permanent installation by welding of previously
non-existing brackets to add strength to the longitudinal hatch
coamings to eliminate the flexing of the hatch covers and
fracturing of the container base sockets." [Emphasis supplied.]
We find that this item is dutiable based upon Matson's
statement in its application that this item was performed, at
least in part, "to eliminate the flexing of the hatch covers and
fracturing of the container base sockets." Work which is
performed to correct a problem, deficiency, or state of disrepair
is dutiable under 19 U.S.C. 1466. The record indicates that
there was a problem, deficiency, or condition of disrepair.
Accordingly, the work is dutiable.
Modifications to Transverse Box Girder (535). Matson
states: "... the work clearly refers to a structural modification
due to a deficiency in design construction of the transverse box
girders."
Matson has not provided any information which would have us
change our earlier findings. The invoice clearly reflects that
fractures or cracks occurred, and that the work involved in this
item was related to the fractures and cracks. For example, the
pertinent invoice states (and this is just one of the instances
on the pertinent invoice where cracks or fractures are
mentioned): "Where fractures have occurred in transverse box
girder plate and/or where chocks were not properly aligned,
installed reinforement [sic] per sketch 535-1."
This item is clearly dutiable under 19 U.S.C. 1466. Work
performed as a result of fractures, cracks, or other disrepair is
dutiable.
14 items of prefabricated steel. Matson reiterates the
claims of its petition that the prefabricated steel is eligible
for treatment pursuant to 19 U.S.C. 1466(h)(2) and/or (h)(3).
We remain unpersuaded.
With respect to 19 U.S.C. 1466(h)(2), it is our position
that 19 U.S.C. 1466(h)(2) contemplates duty-paid entry of
eligible spare repair parts or materials having been made prior
to the vessel repair entry at issue. The petitioner has not
established that this occurred.
Prefabricated steel is not a "part" eligible for 19 U.S.C.
1466 (h)(3).
Item 18 on CF 226. Matson repeats the claim of its petition
that item 18 on the
CF 226 "is not dutiable because it constitutes accessories and
equipment for containers which are instruments of international
traffic and which therefore may be entered without duty pursuant
to 19 C.F.R. 10.41a(a)(2)." In its petition and protest, Matson
describes this item as "container deck sockets."
Matson has provided no documentary evidence in support of
this claim. The pertinent invoice does not include information
which would link this item with containers or which would
indicate that the subject item is accessories or equipment for
containers. Therefore, we find that this item is dutiable.
HOLDING:
As detailed above, the protest is denied.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be mailed by
your office to the protestant no later than 60 days from the date
of this letter. Any reliquidation of the entry in accordance
with the decision must be accomplished prior to mailing of the
decision. Sixty days from the date of the decision the Office of
Regulations and Rulings will take steps to make the decision
available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, the Freedom of Information
Act and other public access channels.
Sincerely,
Director,
International Trade Compliance
Division